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Black Iron inks memorandum of understanding with Glencore subsidiary over Shymanivske project

A non-binding memorandum of understanding (MOU) has been signed with a subsidiary of Glencore
An iron ore  wagon
Black Iron plans to produce a high grade 68% iron content

Black Iron Inc (TSE:BKI) is set for an offtake deal for its Shymanivske project in Ukraine with mining and commodities titan Glencore PLC (LON:GLEN), it told investors Wednesday.

A non-binding memorandum of understanding (MOU) with a subsidiary of the group sees Glencore investing to help fund construction of the project in exchange for offtake of up to the full phase one planned annual production of 4 million tonnes, with terms and the amount still to be negotiated.

READ: Black Iron's Shymanivske project economics bolstered by recent price spike

Black Iron plans to produce a high grade 68% iron content concentrate with very low levels of trace elements that can be used to produce high-quality iron ore blast furnace pellets or premium direct reduction grade pellets.

The project is expected to be built in two phases, with a capital investment of US$436 million for the first, which is expected to produce 4 million tonnes a year

"I am excited to welcome Glencore as an offtake investor for construction of the Shymanivske project as well as their agreement to work with us to help secure additional financing," said Matt Simpson, Black Iron's CEO. "Glencore's involvement significantly strengthens our capability and draws on their extensive international network, experience and market knowledge."

The MOU announced today also allows the firm to give offtake to other equity investors subject to the investment terms offered being equal or superior to those proposed by Glencore.

In discussions

Black Iron noted it is currently in discussions with other companies interested in an offtake deal in exchange for construction financing.

Securing a complete finance package as well as the required surface rights are the two main areas of focus for Black Iron management.

Shymanivske is located in Kryvyi Rih, Ukraine, a developed iron ore mining region with well-established infrastructure located well away from the conflict zones.

A rescoped preliminary economic assessment (PEA) issued last year estimated that Shymanivske will have an unlevered after-tax net present value of US$1.66 billion using a 10% discount rate and an internal rate of return (IRR) of 36%.

The NI 43 101 resource estimate was put at 646 Mt (million tonnes) of measured and Indicated mineral resources, consisting of 355 Mt in the measured category, grading 31.6% total iron and 18.8% magnetic iron, and indicated mineral resources of 290 Mt grading 31.1% total iron and 17.9% magnetic iron, using a cut-off grade of 10%.

Shares in Toronto advanced nearly 6% to $0.090.

Contact Giles at [email protected]

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